McIlwee originally joined Tesco in December 2000 as UK finance director, and recently served as distribution director. He takes over his new role as Higginson moves to become chief executive of retailer services.
Tesco CEO Sir Terry Leahy said: “I am delighted that Laurie is joining the Tesco Board. His appointment is a great example of the strong internal talent coming through the business at every level.
“Laurie has a strong track record here and overseas and is highly respected. He has a great grasp not only of finance, but of operations and strategy. His appointment will further strengthen our board and support our plans for the long-term growth of the group.”